DOMINION FINANCE

Hokitika Guardian, 30 April 1932, Page 5

DOMINION FINANCE

PRESENT POSITION

STATEMENT BY MINISTER. (Per Favour of Government). WELLINGTON, April 20. * The Minister of Finance, Mr Dr.wnie Stewart, made the following statement in the House of Representatives this afternoon: “It was pointed out in the Financial Statement, recently issued, that, in the' present circumstances, the bridging of the gap in the State’s finances must be largely accomplished bv means of reductions in expenditure. In view of vaiious statements that have been made, suggesting that adequate steps have not been taken to reduce expenditure, I wish to review hrieflv. the economies effected since the depression began to grow acute during the financial year 1020-30. “At the commencement of the trouble, economies were mr.de in Departmental votes to the extent of £260.000. During the following two years economies were made as follows

Subsidy on rates transferred to Highways Accou n t 5 —.£220,000. Interest Charges on capital transfers to Highways Account —£60.600. Transfers to Discharged soldier’s Settlement Depreciation Fund stopped—£so,ooo. Total adjustments: 1930-31, £1.360,000; 1931-32, £4,320,000; grand total. £5,680.000.

Thus in the three years to the 31st March hist, the economies and adjustments effected amounted to £5,940,000 per annum.

Further Retrenchment. “In regard to the current financial year, the Government have now dealt with most of the recommendations contained in the Interim Report of the National Expenditure Commission," the Minister stated. “The savings recommended by the Commission totalled £2,976.262. The savings effected for 1932-33 totalled £2,040,290. Further savings approved for 1933-34 totalled £246,100,- leaving £90,662 held over." “I may mentfion,” the Minister said, “that some of the savings held over have not yet been finally dealt with. It will l>e seen that of £2.976,2(12 savings roeonuneiuled hv the Royal Commission, no less than £2,286.390 have been effected or approved by the Government. -These economies and adjustments do not complete the list for the financial year. In addition, relief to the Consolidated Fund will accrue from the following; items: Abolition of subsidy on unemployment funds, £1,450,000; relief to hospital subsidies from unemployment funds, £200.000; Hoover moratorium ((if extended), £600,000; further reductions by railways, £100,000; total, £2.350.000. Adding the savings in accordance with the Commission’s recommendations of £2,040,000, the total savings and adjustments at present in sight for 1932-33 are £4,390,000. “The grand total of the relief to the Consoldated Fund over the period under review is no less a sum than £10,330.000. of which approximately £2,509,000 has been obtained by various adjustments, and the balance of £7,830,000 from economies. These figures indicate the strenuous efforts made to cope with the position. However, notwithstanding the economy measures adopted, or contemplated, savings of this magnitude are not obtainable without drastic action. The summary of the position set out in the Financial Statement indicates that there would still remain a substantial prospective deficit for this financial year.The Deficit. “It will be remembered that the Committee of Economists considered that, if we could end the year with a deficit of about £2,000,000, It could be regarded as a manageable deficit. In the Financial Statement, of 7th April, 1932, it was estimated that, to confine the deficit to not more ■ than £2,000,000. it would be necessary to effect savings and adjustments of £4,100,000, and to impose extra taxation to yid’cl £2,200,000. Since that statement was made, I have reviewed carefully the available sources of taxation which might yield the amount of £2,200,000. indicated as necessary. It is clear that the remaining taxable capacity of the Dominion is limited, and it is difficult to devise ways and means of obtaining additional revenue without adding to the fnrmuhriile burden of private businesses, both primary and secondary. "In the area of direct taxation, it would only he feasible go obtain any substantial amouiu by a series of minor impositions’ of an irritating nature by

o!' varh us stump Julies nnd reJiiciinivs ci 11 io exempt ions in regard to income tax ami so oil. 11l -t 1 1 0 area of indirect ‘taxation, it would he necessary te resort to a Sides Tax, and to taxation on various items of eonsumption in dadv use. These various expedieiTs could lie made to yield by wnv of taxation, the amount of £2.200.000 indicated in the Financial •Statements; but. in the process of

doing ‘so, the items of indirect ’taxation, such as sales tax, etc., would inevitably tend to increase the co-t of living at the very moment when bv various reductions in wages and fixed charges, we are .seeking to reduce the cost of living. “The one process would be to some extent negatived by the other. Moreover, at the present time, 'further taxation cannot but have a depressing influence at a time when the whole community is fighting a hard bat tie to hold its own against an unprecedented depression. Having all these* factors in mind, I have • oensidered it wise to make a special effort to afford the community some breathing space from further tax burdens. I propose, therefore, to withhhoid our remaining taxable capacity meantime, and to fill up the gap by a further recourse -to our reserves amounting to £10,500.000, invested in the Discharged Soldiers’ Settlement Mortgages. “As I have previously stated, these reserves were built up oh; of surplus revenue in prosperous years. In order to get over the difficulty that it would be unwise to soil them at n Heavy discount on their present day mtirkiE values, I took power, in last year’s legislation, to draw against them by hypothecation of the securities, pending the time arriving ‘when they can be sold at their real value, or the receipts therefrom can be made available. This authority was nd; used last financial year, but it was hoped that some use could 'be made of it this financial year. Since then, I have been negotiating with the Bank of Now Zealand, and have now to announce khat T have concluded a satisfactory arrangement to obtain £2,500,000 by hypothecation of the securities.

‘T understand the National Bank of New Zealand proposes to take a proportion of this amount. The amount will be paid off out of funds provided by the repayment of iloans by the Discharged Soldier Settlers. About £200.000 from this source was allowed for in the Financial Skatemeut, so the additional amount thus made available is £2.300,■OOO. This procedure will enable us to keep in reserve, for a Inter da L " whatever taxable capacity the community may still -possess, and •stiff’, reach the result already laid down as desirable, viz., that we should end tile year with a manageable deficit of £2,000,000.

“It is true that, by imposing the taxation of £2,200,000. and n+ the same time throwing into (the firing line iff* reserves now being called on, we could actually balance the budget this year, but I do not think it wise or desirable to exhaust both our taxable capacity and our reserves in this year when wo do not know what yet lies in front of us. It should be noted, however, that this proposal, combined with khe deficit for the last financial year, end the amount, up to £2,000.000, that may eventually'be carried forward this year will practically absorb the effective value of our remaining discharged soldiers’ settlement reserves, after avowing a safe margin for the investment losses that may be suffered on account of the depression.

“This means that ally further declines in revenue must he met by ceonnomies in expenditure or increased taxation. This valuable assistance to the Government afforded by the Bank of Now Zealand, and the -National 51 ;l nk of New Zealand will be ndd'tional *o their share of the extensive Treasury Bill nr-ogramnie necessary to tinaneo the remititanres to London, liia--1 uriiiK loans and general rerpiiiements during the year. A rrnncements in resjar.l to this gvoorai'. finance are being Jnhd'O with the •..Vssae.i'ded Banks, which are. in this way, affording great assistance |o the Government in -meeting its d iff. cult financial problems'.

1930-31. 1931-32. Reductions in sal- £ £ i>rios anti wattes Hoover Morator, — — 1,390,000 ium 870,000 f I rants and Subs, 130,000 135,090 Depth votes III vs. and P.O. 425,000 865,000 reductions 475,000 1,060,000 Totals l ,030.000 4.320,000 Total economies £5.350,000. for both ycnrs—